Venmo owner PayPal had its worst day after fizzling user growth, as pandemic thrivers become divers

Splitting the brunch bill IRL… PayPal had a few bright spots in its earnings on Wednesday: Quarterly sales and payment transactions hit record highs, while millennial fave Venmo generated nearly $1B in revenue (FYI: PayPal makes most of its money from processing fees). But then PayPal warned that new users are expected to reach only 20M this year, compared with the 46M added last year. Cue: PayPal stock had its worst day ever, plunging 24% and shedding $50B from its market cap. A few reasons for the cooling growth:

• 1. Lower-income users are cutting back on spending as prices soar and stimulus savings run dry. In December, US consumer spending fell for the first time in nearly a year.
• 2. PayPal had to close 4.5M “bad actor” accounts after its incentive to give new users a $10 sign-up bonus backfired.
• 3. PayPal's split from eBay, which was its primary checkout service, left a $1.4B hole in profits.

$10 Venmo request > $10 bill… The pandemic pushed us further into contact-less spending as more than half of Americans swapped cash and credit for digi-payments. In 2020, PayPal had its best year ever with total payment volume reaching nearly $1T. Now it’s doubling down on user engagement vs. user growth to revive spending. Think: building a PayPal “super app” where users can pay bills, access savings, and trade crypto all in one. Yet it still hasn’t integrated PayPal with Venmo.